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Us 37, China 30, U.s. 25, United States 11, Tsa 9, Russia 8, Washington 7, Ukraine 6, Syria 6, Conrad 5, America 4, Asia 4, India 4, Stephanie 3, Alan Greenspan 3, Henry Kissinger 2, Robert Zelig 2, Paul Ryan 2, Herman Cain 2, Europe 2,
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  CSPAN    Washington This Week    News/Business.  

    November 18, 2012
    2:00 - 5:59pm EST  

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those are widely hailed as a very good thing. but what do they really mean? if we are striving to balance the budgets or surpluses in the future, we better step back and figure out what that means for the domestic private sector. but what do they really mean? if we are striving to balance the budgets or surpluses in the future, we better step back and figure out what that means for the domestic private sector. what it meant was that if the government was hoping to collect more from us than it is going to spend -- that is, the government is going to run a surplus. the rest of the world is going to take more from us than it is going to spend buying our goods and services. that drives the domestic private-sector, us, into deficit. it has to. it adds up exactly. if you have a 4.5% trade deficit and a 1% budget surplus, the private-sector is going to
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be in deficit 5.5%. the only way you keep the private sector in the red, above zero, is if the government deficit is big enough to more than offset the trade deficit. if the u.s. is running trade deficits on the order of 4.5% of gdp, the government deficit has to be at least 4.5% of gdp, or the private sector will fall below zero. every single time. here is the cbo forecast. this is what is projected to happen to the government deficit if we hit the cliff. this is the alternative scenario. if we hit the cliff, the projection is that the government deficit will shrink
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to around 2% of gdp. deficits of 2% of gdp, together with trade deficits of 4.5%, in the private sector is by definition going to be in the negative. we are going to be running a deficit. here is the same image flipped over. it is the mirror image of that. it says that if the government reduces its deficit, it is reducing the surplus to the non-government sector. you have to be able to put these things in context. why does it matter? what difference does it make if the private sector is in surplus or deficit? it turns out it makes a big difference. p the private sector budget
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balance is shown here, the blue line. those gray bars are recessions. we have had 11 of them since the second world war. in every single case leading up to a recession, you will see that the private sector budget position -- the surplus shrank. and then the private sector tried to retreat. you see them trying each time leading up to a recession. they are trying to say, i do not want my surplus to get any smaller. i am getting uncomfortable. at that point, if the public sector does not loosen its felt as the public sector -- as the private sector is trying to tighten its belt, wheat and-up in a recession. the -- hamas we -- we end up in a recession.
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government debt is equal, and to the penny, to the non- government surplus. in every country in the world, this is true. the government deficit is the non-government's surplus. their red ink becomes our black thing. their deficit is our surplus. the grand bargain means austerity. those reductions in the government deficit -- if the government continues to reduce its deficit, it means the private sector surplus will fall. it shows you what will happen when the private sector surplus falls too far. this picture has no economic meaning. it drives lots of concern and hysteria, but it has no economic meaning. alan greenspan was asked a question by paul ryan. this was years ago.
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paul ryan posed a question. he said, "wouldn't it be a good idea to introduce personal savings accounts? and wouldn't that put social security on a more stable, secure footing, going forward? when this improve the solvency of the system?" alan greenspan's response had to come as a surprise to the congressman. he said, "i would not say that social security is on on sound footing today, because there is nothing to prevent the federal government from creating all of the money it wants and paying it out to someone." that is a quote. the issue, he said, is, will the real sources be there in the future for retirees when they are needed? he turned the focus away from financial resources, which can always be there, to the real resources, which is what we should be focusing on -- employing people, producing the capital, the goods for the next generation, having the real resources. it is what matters.
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it is time we realized that the federal government is not like a household. the u.s. dollar comes from the u.s. government. it does not come from china. we control our currency, as jamie said a moment ago. we are very different from the countries that adopted the euro, that gave up their currency, that can no longer issue currency in order to spend. the united states government is not revenue-constrained. that was greenspan fifth point. we cannot be forced into default, another point alan greenspan has made powerfully, over and over again. there is no economic reason for a grand bargain. we are living way below our means. we are told we are living beyond our means. we are living way below our
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means. the red line is our potential gdp. the blue line is where we are. the difference is the output and income that we sacrifice every day we fail to bring this economy back to full employment. we have tons of spare capacity. factories are not operating anywhere near historically high capacity utilization rates. there is all kinds of extra capacity to produce. we have millions of people who want to contribute. and we have useful things for them to do. this is our infrastructure report. what do we need? $2.20 trillion to bring our grade up from a d iverakk,' -- overall. we have people who need to work and the financial capacity to do it, the real resources.
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what we do not have is enough jobs. we are focused on a grand bargain, which is another way of saying austerity. president obama got it right when he said that companies are awash with cash. what they are missing is enough customers out there to prompt demand and justify them spending more on plants and equipment. businesses need customers. they do not create jobs. austerity is the opposite of income creating sales. it reduces income. tax increases reduce income. spending cuts reduce income. both, i would argue, are the wrong medicine for the economy today. we have seen the effects of austerity. we do not want to follow, these countries over the cliff and gratuitously -- we do not want to follow these countries over the cliff gratuitously. [applause] thank you. >> i want to talk to brad. take the next. >> i have a couple of things to say. our $2 trillion figure is not a
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recommendation. it is actually a response to the fact that everyone thinks that $4 trillion is what is needed to achieve -- a debt stabilization gold, stabilizing debt to gdp, to keep that from rising faster than the economy, which ultimately is unsustainable -- how long that is sustainable is a question. how fast it is rising is predicting the future, which is hard to do, as yogi berra and neils bohr, an interesting pair, have said. the arithmetic behind it -- it is not a recommendation. if you want to stabilize the ratio 10 years out, the budget window everybody is talking about, you do not need $4
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trillion, which is the number everyone thinks bowles-simpson would entail. you need $2 trillion. you could choose to take longer to stabilize the debt, or stabilize at a higher level of gdp. you do not need as much. or you can do it faster if you want to pursue a dangerous austerity program. you can get $1 trillion over 10 years just for the bush tax cuts. we argued very strongly that you definitely need a balanced the deficit reduction program, bounced meaning revenues have to play a part. you do not stabilize the death. we are not talking about balancing the budget. we are talking about stabilizing debt.
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if you do not do that on the backs of low income households. low income programs have been exempted. the 1990 budget, "read my lips," where george bush did allow texas to go up -- taxes to go up, there was an expansion of the earned income tax credit. when i say grand bargain, i am not thinking austerity. my notion of it is what ben bernanke has said whenever he testifies, as stan said. except larger budgets while we have selected the economy. defer stabilizing the debt to down the road. i do not think we have to do a lot of thinking about that. we have a lot of ingredients.
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we could do it immediately, if it were not for the political problem that bruce identified. >> you have been scribbling furiously. >> three points above the long- term future. first is, as others have said, he is very difficult to forecast the fiscal position of the united states government, 20 years out. the past record is atrocious. anybody who was here in the early 1990's will remember that nobody was expecting there would be surpluses a few years later. why did that happen?
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it happened because of the force of power of the information technology boom, the creation of private credit, and rapid increase in tax revenues. stephanie showed us something that was not a forecast at the time. those who were there in 2000 remember that the secretary of the treasury at the time and the chairman of the federal reserve were talking about a 13-year horizon for the complete elimination of the public debt. there was no forecast that the
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technology boom would come to an end, but it did. from 2000 onward, we were back into a more normal position of the government running substantial deficits as the private sector rebuild its financial position. that is the first point. long-term forecasts, the idea that one can control the future position of the debt and deficit by actions taken today, is an extremely tenuous and debatable idea. the second point is that there are certain assumptions being made which create extremely scary scenarios. those numbers that were shown -- in stephanie's presentation, the expectation that public debt would rise close to 200% of gdp by 2005. what is that based on? two important assumptions drive these projections. when is that health care costs will continue to rise more rapidly than output, and that the share of health care in gdp will rise to 40% or so by 2080. this is something we know is not going to happen. it is in violation of herbert stein's law. when a trend cannot continue, it will stop. [laughter] the reality is, we are not going to spend 40% of gdp on health care. it is not going to happen. building that into a forecast is a mistake that should be corrected. there is an assumption that
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interest rates will rise to levels consistent with what they have them in the past. but short-term interest rates, if they rise higher than the rate of gdp growth, would generate a compounding effect, which will greatly increase the debt to gdp ratio. but ask yourself -- how likely is it that short-term interest rates will be driven up 400 basis points in three years? it is not likely at all. if it happened, the economy clearly would collapse. people's houses would lose fell you. they would default on their mortgages. you would have a disaster. not going to happen. adjusting these assumptions to give you a less tendentious forecast would greatly, i think, he's the political climate surrounding this discussion. -- ease the political climate surrounding this discussion. we need to consider what our priorities are. right now, what are the problems we can tackle?
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unemployment. foreclosures. climate change. infrastructure. these are problems that have a very concrete form and a very immediate and pressing -- place immediate and pressing demands on us. why is it that this very uncertain, and in some respects highly improbable, and in any event -- and certain and probable deficits scenario is driving our immediate policy discussion. it makes no sense. in three or four years, if it turns out that the people who have been wrong for decades on this question, in spite of repeatedly asserting their position that the markets are
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going to turn against the u.s. government, if it turns out they are right, the u.s. government can address that problem at that time. but there is no reason to assume it based on the record we have so far. nor the position being taken by the capital markets. we do have people, institutions, foreign central banks, with a lot of money at play. what is their attitude toward the u.s. government fiscal position? it is very clear. look at the long term interest rate. look at the bond rates on treasury bonds. they are at historic lows. that reflects the true attitude of people who look at this with large amounts of money on the table. >> a question from the audience. i think so. you may have to leaned down or is the microphone. >> i lived most of my life in europe. it always impresses me how core countries had no difficulty financing both a welfare state and public investment. we seem to look at trade-offs.
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is there, in your view, a trade-off between growing entitlements spending -- and it is growing, with the retirement and costs of medical care. is there a trade-off between entitlement spending and more public investment? i notice we do not have a separate investment budget. we seem to regard all of government spending as equally evil or good, or doing the same thing. instead of dividing it between entitlements spending and consumption and public investment. could you comment? >> i would say very briefly that you would see a trade-off when you would see a strain on physical resources, a strain on the capacity to use the capital equipment, or a strain on the supply of labor. when there are no such strains, quite the contrary, as stephanie pointed out.
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we have a vast excess supply of labor, a vast underutilization of capital equipment. one issue we need to face it is resource costs and energy prices, but that is not being driven by global use of the moment. it is being driven by other factors. i am not optimistic about the long-term potential growth. but is there a trade-off between what we should do to protect our elderly population and to provide adequate medical care to the whole population, and what we should do to protect our infrastructure and address energy and climate issues? no. we are underperforming on both fronts. >> it is not a budget trade- offs. as long as we think revenues can only be this high, there is a trade-off among those
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priorities. we have to accept having higher revenues to pay for the things we want. the softens that trade-off. impediments are not a drain on real resources. -- entitlements are not a drain on resources. they are a transfer. when we are at full capacity, we have a trade-off. the issue is, we think taxes should only be here. that was probably too low leading up to now. it is certainly too low going forward. >> your point about capital versus operating expenses -- i was part of the, the commission to study whether the u.s. should have the capital budget, created during the clinton administration. i went into thinking we should, and came out of it thinking we cannot, because the decisions
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would be made by politicians has opposed to accountants or someone else like that. those are definition questions. think about new york in the 1970's, when the police department was considered a capital expense. try to imagine those same decisions at the federal level. suddenly, education would be classified as a capital expense. it was those types of questions as well as one other. would you classify a missile as? it is a capital expense when you build it and an operating expense when you press the button. it was getting too complicated. i came out of it thinking you should not divided. >> one should be careful about arguments that we should be spending more on investment and less on what is classed as,
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let's say, social security or what is called entitlements. for one thing, military procurement accounts as investment, but we should only be doing that to the extent that we actually need it for legitimate national security purposes. the president's point about not having as many horses and bayonets as we had in 1970 and could be appropriately applied -- 1917 could be appropriately applied. education expenditures -- it is hard to see why that is counted as investment and health care is an operating cost. >> seniors are going to say, just because we are a little older than the kids you are educating, you can invest in us as well. it became a definitional nightmare. >> i am a lawyer, not an economist. [laughter] >> do not rub it in, ok? >> i am delighted to be here, because i am interested in peace and security.
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stephanie, when you were putting those charts up, there were two of things. economists always tell me that our trade deficits are caused by a lack -- we do not save enough. is there causation in that formula? or is that just an economic accounting? secondly, net exports -- my understanding, when you are running-net exports of a major portion of your economy, that is a drag for your economy. a big part of producing economic prosperity in this country may be to go after the trade deficits and reduce those as part of our gdp growth. are these correct things to be thinking about? is that the right analysis fax >> ok. is a drag for your economy. -- the right analysis? >> ok. let me take the last one first. is it correct that trade deficit act as a drag on gdp?
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yes, it is. if the deficit were a surplus instead, we would have hired gdp, presumably higher employment, and higher economic growth. could we do even better? could we achieve full employment domestically with the right mix of macroeconomic policies, and be able to consume everything that it is possible to produce here at home, plus anything the rest of the world wants to produce and ship to us? i think that is certainly something worth thinking about. it is possible. we do not tend to think in those terms. we tend to think in terms of jobs leaving, corporations leaving, producing abroad. whenever we buy something that
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is produced elsewhere, it is costing jobs. we could have a jobs program that allows us to run our own economy at full employment, take advantage of the ability to produce at capacity, have all the goods and services that we can produce domestically, and enjoy whatever the rest of the world wants to produce for us. right now, much of the rest of the world does rely on exports as part of their economic growth strategy. they want the u.s. dollar. as long as they are willing to send things to us in exchange for the u.s. dollar, it could be of benefit to us if we got our own macroeconomic policy correct. >> paul gallagher, eir news service. a question for professor kelton. i did not hear everything you proposed. but if there is no monetary debt crisis, if there is not a
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fiscal cliff but a physical economic cliff, what would be your response to a hamiltonian debt reorganization, creation of a national bank for purposes of pursuing infrastructure platforms and related development, and assumption of debt associated with that by the national bank? that would have to be accompanied with a glass- steagall reform. >> it is an interesting thought. the motivation for schemes like this are driven by the thought that the debt is too big, and the way to get around that to finance things is through direct money creation that did not involve the offset, in terms of borrowing. this is something congress
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could do. congress could decide it is not going to offset, dollar for dollar, deficit spending with increased borrowing. that would, i suppose, produce some hand-wringing about the size of the national debt. if we had better understanding of what the risks and challenges are, in terms of growing debt -- for me, it is not the jet -- the debt to gdp ratio that is to be stabilized. it is the debt service that becomes an issue. it is not the debt bank to gdp ratio, but the debt service. i think, for me personally, i prefer a better understanding of how the monetary system actually works and understanding the debt is not the risk people make it out to be. >> i think it comes down to the fact the financial system, on which we have relied to finance
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support economicly and set the direction of economic activity. in the 2000's, it was the housing and real-estate disaster, the senate -- this financial system is not functioning as it should. the deficit destruction distracts our attention from the fact that these institutions that are central to the functioning of any private capitalist economy need to serve the larger public purpose of supporting economic activity and doing so that is -- in a way that is constructive to the whole. as long as this is the case, the public sector will be running substantial deficits because the tax revenues will not be there. there are structural issues. you have to have decentralized decisionmaking.
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that is what private banks are. until we cope with the homeowning sector, with the problem, the public sector is basically going to be playing with a very weak hand. >> we are coming close to running out of time. the three of you will be the last questions in the audience. keep your questions short and we keep our answers shorter. >> my name is tyler. is not it true -- >> were you not in the fourth vote? >> is not it true that it does not pay for spending?
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>> short answer. >> yes. >> quick question. what about the national economy? we talk about raising revenues by taxing the rich more. the standard cynical response is the rich will avoid being -- paying taxes. we know people offshore money and i have been reading lately about how the u.s. is also a haven for offshore and money from other countries. how much is that a problem in
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our current situation and how can we prevent it from being a problem in the future? >> the main problem is with corporations. multi-national corporations which are able to arrange their affairs in such a way that they do not appear to realize any profits anywhere. this is not just a problem for us. if you read the british newspapers, is a huge problem over there. starbucks has never paid any taxes in britain because it claims it has never made any profits. there are lots of ways these things can be done that take to do -- take too much time to explain. it is a problem related to
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multinational corporations. >> the last question from the audience. >> i am with peace action. i do some lobbying around military spending. i know you will talk about that later. what i have been finding is that when i talk to anybody in politics, they do not have the same understanding you guys have about the deficit and the budget. everybody thinks this is just a terrific problem. -- horrific problem. i am convinced this is not a problem. i would like to see some changes in the way we spend our money. i think we do not need to be spending what we are spending on the military and we could use that money in better place. -- wheys.
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we could require -- ways. we could enable the government to negotiate. there are ways to address it. i find myself a little bit confused about how to do the argument. >> you do a great job in describing these kinds of things. >> i am not sure. there are a lot of parts to the question. how to talk about the fact, the priority and the debt sensibly. the problem is humans think that a budget is a budget and a household budget is the same as a government budget. it is very different. there are a lot of discussions we have had up here about why that is always the wrong road to go down.
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what really matters is that we have the productive resources in the economy and having enough, having our priorities straight. arguing the priorities, arguing that -- i do not know. i am floundered. it is a big question. a tough question when you are confronting people that are in panic mode about the deficit. what really matters is having a strong economy. focus on that first. thanks marc. -- think smart. >> very much the same message. we have all had the experience of being on the receiving end of a high-pressured sales job. where you have got to make up your mind now. the only information you have is the reason is what i am giving you.
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-- you have is what i am giving you. a condominium sale, or a car deal, i think you would recognize that is exactly what we are facing as a country in this post-election period. the extraordinarily confident assertion of things that you may, you would find out were not true. take a deep breath, get a cup of coffee, and think things through. that is the approach we are trying to occur -- trying to encourage. there is this long-term deficit problem, some would say, that we need to address, but we should do so in a sensible way because it is not urgent. and those who say, we need to place our priorities on the immediate problems we actually face, and at the very best, differ this other issue -- defer this other issue which is highly suspect at some other time -- speculative. it is extremely hard to find a footing for that argument. but this is a moment, a gift from the american public, to take that deep breath, to be
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realistic about the world as it is, and to approach the next two years, four years, with a kind of new spirit of determination and realism and practicality. i hope we can move in that direction. >> 30 seconds. >> we do a lot of talking to people, members of congress, and others, and persuading the public. what you want to do is be armed with some facts and analysis. when you start to get the hysteria, there is always the, actually, and point to someone else about what is really going on with social security and medicaid. >> we have to end in about a
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minute and a half. one quick question for everybody. same question. bring it back to the fiscal cliff. has the debate over the cliff, the fact they have said this will cause massive layoffs, have we finally put to bed the argument that federal spending cuts do not affect jobs? can we conclude that spending cuts do affect the number of people being employed? >> yes. >> yes. >> i still do not think republicans believe it. defense cuts cost jobs. other cuts create jobs. [laughter]
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>> do we feel vindicated? yes. and does the other side believe it? no. >> something has occurred over the last several months saying this will cause massive layoffs. here is the last question. do you have a twitter or a blog? >> i do not. visit epsusa.org. >> my twitter handle is @deficitowl. neweconomicperspectives.org. >> you can find where our twitter is and our facebook is. >> would you all join me in
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thanking everybody? [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> tim pawlenty, now the president and ceo of the financial services roundtable, offering a response to the so- called fiscal cliff and u.s. at 6:00 p.m. eastern on c-span. >> truman had two big puzzles and his life. the first was that this was a man who got into politics after having failed at many businesses as a young man. the only way to get into
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politics in missouri was to be part of a machine. there were two and he hooked up with the tender guest machine. and arguably the most corrupt and often vicious machine. i said to myself -- how could this happen? how could he possibly work with this machine for local politics? what was behind the decision? what is the story about the atomic bomb before he became president and then the decision that was on his desk? this is still a controversial story. >> from his early life through his presidency, she looks at the early life of president truman
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on "citizen soldier." >> on tuesday, the annual meeting of the ceo council was held. we begin with remarks on the global economy and the fiscal cliff by the former world bank president, robert zelig. austin goolsbee and michael boskin. this is about 45 minutes. >> good morning, everybody. i have three distinguished economists and economic policy- makers talk about. we have a wide touring to spend -- terrain to span. immediately to my left, robert zelig. austin goolsbee, former chairman of the council of economic
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investors under president obama, and michael boskin, who spoke last night as chief economic advisor for george h. w. bush. we have a whole world to spend. i want to start out with the united states. very few people in this room understand the president as well as us. many are asking -- what is going to come? i would like to look through the fiscal cliff and ask you to describe for us how you see the budget negotiations playing out over the next six months. >> it feels to me like they always had a deal last year. the principal bottleneck was not that the president was on willing to offer cuts. it was that there was a group of republicans in the house who would not go for the revenue. i think that is still the bottle
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neck now. you probably saw the article this morning from hubbard. i take from this collection some optimism of 2013 and the way that might play out, whether we go or do not go over the fiscal cliff, we get to some space where if they did $1 trillion in cuts and reforms it was $1 trillion on discretionary, $1 trillion on revenue, and $1 trillion on saved interest, that is ok. if you did that, you could sort out a grand bargain in a way that would be a good accomplishment for both parties. i think that the principle thing in that is that -- can you get a significant chunk of republicans in the house to
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support it? >> you think that they reach a bargain and it moves quickly over the cliff. >> i thought that is what you were asking. i am somewhat pessimistic that they will be able to sort out at bargain in the next two months. i think there is a serious danger that they go over the fiscal cliff in the short run. it is the same people and dynamic as last party -- last summer. one thing i am confident of the, the president is not going to agree to something that is just going to kick the can months down the road and put everything back onto the debt ceiling negotiations. that is what happened at the end of 2010. they thought they were doing a
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bipartisan agreement saying look, they can do something the other, and that took away all of the points of negotiation and left only the debt ceiling negotiations, in which the president had nothing to offer or demand. it was just a mess. >> michael, robert, here we have a scenario, a grand bargain with a lot of volatility. is that how you see this playing out? >> it will be difficult to get the fiscal cliff resolved in a major way. as we said last night, democrats felt that they had a specific advantage. i do believe that this is not just about numbers. i think that the characterization, there has been a lot of reporting that the
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president moved the bar on what they want. i think that the following is possible for republicans to go for. in the end, a serious entitlement reform that is structural, not just numbers that might evaporate. that any revenue be a modest portion of the total, slightly more than they would like, all of the evidence is from the post-world war ii average of about factual and not projected spending cuts and tax hikes. it does not have to be exactly that, but avoiding the budget and a recession, also revenues want -- come from an opening.
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that is going to be easier to do it is tax reform as well as pro- growth policies along with it. maybe that is a way that they can skip this intermediate step. >> we have had two people talking about not gone over the cliff. >> we have a lot of deal makers in this room. what is important is what you have on the table would make ronald reagan look like a piker. he knows how hard it was, with some very good people. [laughter] the point is, in the fiscal cliff, you will not get any of this done. joe lieberman outlined the
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potential of approach. some cutting, some modest revenue. then you move back to regular order, which trent lott was talking about last year. then you need a mechanism to enforce the discipline. my worry is, you read the washington post report and, frankly, the people doing the negotiations on both sides do not know the basics. starting with the fact that you need one piece of paper, not competing pieces of paper. i would be worried about -- if these people just talked to each other as opposed to negotiating and pontificating on their positions, the president will be very tempted to let the tax cuts expire, it is not sustainable because of the alternative minimum tax and other things.
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that is a gutsy, given the state of the economy, and people need to be prepared for it. >> let's talk about the rest of the world. we want to ask the ceo's in the room where you are investing in 2013 and in which regions, latin america, asia, africa. we will put up the answer as soon as it comes in. let's start talking about your global growth out looks. robert? >> the striking thing -- you can call me bob -- >> sorry. >> over the past five years, two-thirds of it has come from developing countries, and as
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recently as the 1990's those numbers would have been in the 20's. combined with what we heard about a year of and the demographic problem of japan, there is a big shift going on in the international system. what i want to connect to is the stuff we're doing at home in the united states not being enough. some of the things the prime minister was talking about, leveraging survival with international growth. the old system is the logger going to exist in the old form. you have got markets there. africa, 5% or 6% per year, back on the growth trajectory. >> can these developing markets keep up the pace but they have
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demonstrated? we have already seen china slowed down. >> it will vary by a cut rate. china will slow down. the one child policy means there is less labor in the market. it goes to the critical issue of the middle income traffic. is when you start to get the per-capita income, which creates opportunities. the trade patterns, logistics', supply chains, i was speaking to one of the c o's last night whose major company was bought out by a chinese company. what is important for people to recognize is not just a trader growth, but limit births, exchange, the system will go through a transformation.
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>> growth, 2013? >> the u.s. has been growing maybe 2%, which is not good, and that is the fastest of pretty much the whole advanced world. that tells you what is wrong and what has been wrong. >> what do you make of this answer? >> if you look at the u.s. in context, other than the six months to nine months of bawdiness, prospects on not bad. the fact that major companies are investing is likely a forward-looking indicator, with populations going up by about 10 million. we got over built in housing. historic way housing related construction, real estate, houseful oriented manufacturing is about one-third of the normal expansion. it is a highly cyclical part of the economy and we have
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literally got the zero out of that for multiple years. as we start to turn the corner, even if it does not go back to the go-go days of the 2000 path, that is still -- 2000's, that is still going to add a component and we could get up above that. i do not think that those numbers are that surprising. i do think that emerging markets tend to grow faster on average. but when they go wrong they go terribly wrong. that is the history of investment in emerging markets. we want them to keep going the way they have been growing. europe, at best, is going to be stagnant in the medium term. japan has had a well documented growth problems. if we are going to shift
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markets, it will be like that. >> i would like to know where the existing investment is. >> those percentages should be compared to their base as well. >> they are increasing investment. >> but the increase could be because they have a lot of stuff they are replacing. 10% does not mean that all this is new stuff. second of all, the u.s. has a variety of things that could lead us to stronger growth. we should be growing more compared to four -- compared to previous recoveries. i think some of it is policy.
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we can skip that. in asia i think the big issue is china. through aing leadership transition. whether or not they will embrace the reforms that the world bank and china development suggested , land, labor, financial reforms, the pace of that is still very much in the air. the good news is that if they have a financial set of problems with foreign reserves, it is a high savings rate and a political system that can cover it. some what broke -- revelatory, but not this positive.
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the continued difficulty of small and medium-sized businesses is a big drag, but on the other hand you have got energy prices that are low with such financial stretch starting to turn. there are a variety of things with money on the sideline. >> the united states, europe, japan, led america, asia, excluding china, everyone of those regions has experienced some sort of financial crisis over the last 20 years. china stands out as having not gone through any kind of turmoil. can they keep that up? or do we have to watch for an economic upheaval? >> one of the things it is
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important to understand is that the chinese leadership has a real fear of inflation that goes back to 1989. they were going to air on the side of being careful. now that they are pretty much through that, they have the resources to avoid a hard landing. one of the ironies is that you have people in china talking about a lost decade of the past 10 years and what they are talking about is the fact that they have not undertaken any serious reforms. as the labor force shrinks more people will be leaving than coming in. i think that what you see right now is a bit of a debate as people say -- should we avoid a
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hard landing? her there are others who say -- yes, we can do that, but it will build the basis of future problems. the way that china works is incremental. i think that for [unintelligible] who i have gotten to know over the years, he is a good chairman and i would expect that it would move in this direction, but in a gradual process. what i share with people is -- watched the third by the 18th party conference. then you will kind of see the shape of this going forward. the bottom line is that if they do not make some of these changes, yes, the history, of there is a lot of imperfection in these markets. the history is that you have got to move these markets.
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>> growth is slower. >> and it only grows until it will not grow any more. >> you asked about financials. there is economic reform out there, and then there is the -- is there a property bubble financial bubble -- one reason they have accumulated these reserves is the implicit understanding that there is potentially some major capital hole in the banking system. it is hard. the governor told me that the median house of loan to value ratio in china is only 50%. the implication being that there will not be a big problem like there was in the u.s.. maybe the problem is that the debt is not hold -- not held by the homeowner.
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there is the huge debt accumulated at the level of the builders. the financial space of the chinese banking system, there is a danger of that. the chinese are aware of this and trying to think it through. you do not know, we do not know, there is no way to take the official data the following has changed a little. it is true. he said in the u.s. the data comes out a month after the quarter end and is revised for up to two years. and the 2008 went to minus 8.9. it has never been revised. why wait until the last minute? >> they knew what it was going to be. >> now they wait seven days are
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something like that. you learn more about the actual details from talking to people who are doing business. if you ask how is the package shipping coming out of china, and lot of time that can be more informative. >> you are saying that china can manage the transition. there are soft landings. >> there is a risk of a harder landing. slowing from 10% to 8% is like going from 2% to 0%. they want to keep growth up by. bob is right. they have this fear of
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inflation for a lot of reasons. they also had serious inflation. they were in large part of the typical chinese budget. they are not happy with our extremely loose monetary policy. i think this is an issue. i do believe they are capable of acting quickly and filling the hole in the blanks. that is a much harder thing. we did not do that. the president had that in margins 2009. we have a gradual recapitalization. this is a positive. it has been recapitalized by policy. >> let's talk about the fed and the world central bank. central banks have pumped $11
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trillion into the global economy in the last four years. is this going to end badly of the central money they're pumping index >> it is a serious risk. i do not think it is eminent. it certainly appears that these extraordinary times a quantitative easing his diminishing returns age while ago -- hit diminishing returns a while ago. he should the fed just as one policy. often in the past raising it in time to fall saw -- forestall future has been delayed. it is partly for political pressure. now they're going -- they're going to have a doubly different
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thing because they have to do this. they have tolls to do it. the question is whether the complexity and the pressure will wind up causing serious problems down the road. they will have a situation where they're doing this simultaneously. that is offered. >> you have regular major lunches with the fed chairman. you think the central bank is up to the task of? >> i knew him before he was just academic. >> everybody in the monetary economics group would wake up in the morning and look at the mirror and say why not me? y ben bernanke.
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starting sometime around 2008, he is messing it up. thank you it is him and not me. >> if i would have told you 15 years ago we will be in a moment in which the gdp growth is less than 2%, inflation in the u.s. is well below the 20 target and unemployment has been at or % for manyh8 years, and odyssey they would say to loosen it. if you plugged into what should the funds rate should be, it still says it should be something like negatives 3%. it is understandable why they are trying to do something to loosen monetary rates. the effectiveness was
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highest. >> is this a risk that the men and women in this room have to think about? where would you put that on your list of concerns? >> diminishing returns. you have to watch where the risks start to rise. if you look at farm land prices in midwest, they are above the late 70's highs. have the samedo not leverage. where is the money going in terms of inflation? the third thing is to be fair to the fed. people have not been doing their job. the practice back to a discussion about the budget package and other aspects. that is critical so it can start to unwind.
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the foreign minister of australia said something that really struck me. he said the united states is one budget to away from restoring its budget preeminence. he is sending a message that the united states cannot get its political system to act. europe is not going to lead. others are waiting for the united states. big stakes on the table. >> let's bring up the next question we have for the group. what are the risks that you control and not control this is in the realm of war is that you cannot control. if china slowed down, a euro crisis. or some other risk. >> where is iran at?
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>> energy crisis. >> that belong to #four. while our executives are giving their answers, but is the risk that the men and women in this room that should be keeping not them up at night right now? >> there are many ironies around theg around fiscal clip. the most threatening is the euro crisis. i am of the view that the germans will have to subsidize permanently to hold it together are the eurozone is probably doomed to break apart. on the fiscal cliff, let's get our heads around the correct numbers. if we sign a long-term grand bargain budget deal, we'll be doing the fiscal cliff every
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year for the next 10 years. they think that that is happening is made worse by the fact it will happen without a lot of preparation. it is not fully thought through. we have to do $4 trillion over 10 years. he used to it. this is the business we have chosen. here is what i think you should be afraid of. i did not mean to influence the vote. >> in 1986, we never had a tax reform that raise revenue before. always will may have done big tax reforms the way we do it, there are winners and losers. they say we would give bunch of people a tax cut and others will
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be held the same. in 1986, and they were not actually able to make it revenue neutral on individuals. at the last minute they came and put it on corporations. where are we going to get the money? let's try to stick it on corporations. >> we have one question that has come in. is this grand bargain large enough given the continuing growth of the debt? how worried are you about the impact of interest-rate uture?sing in the featured >> it is step one. it would actually be quite expansionary. it to be helpful in the short term as long as there is not a
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big truck loading of any tax increase. all the data suggests that. is it large enough if it starts to include, it is a very good down payment. there is a risk that interest rates will rise for a variety of regions. i say the single best thing we can do is to be real serious debt reduction deal. i have studied. if we stay on the current debt have as predicted in the president's budget or cbo we could wind up freeing growth using standard estimates to the effect of higher debt ratios from expected higher taxes.
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above the political pain of the debt reduction would be offset by a large economic game. it does not show up in the short term. republicans are not going to be tax collectors. there is a grand bargain that works for some and also for a lower rate and a comprehensive tax reform that would generate extra growth. that would be sufficient to get democrats to agree to series entitlement reform. >> i would like to flip this. i think there is actually an opportunity here. normally the preference is to maintain the status quo. the fiscal clip for require some sort of action. it will not solve the problem.
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the question is how does it set up = solution? and many of the people in this room keep pushing for corporate reform and a repeat of the type of 1986 base broadening in lowering of the raids, some effort to start to get entitlements in a serious way, i think he would find a republican flexibility if they can feel it is not just taking the money away. remember, none of the really understand how washington talks about cuts. nobody is talking about a cut. they're talking about a reduced rate of growth. republicans said you what they cut. all they want is a slower rate of increase. if it is done in a way that is
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not changed the law, it republicans will feel they have been taken to the cleaners. in the american political system, there is interest in the senate. john boehner is serious about doing something. it will not work if the president does not lead. the president has to set the course. you saw that in the legislation i was part of. the big question will be whether this president stepped up and leads. >> on the one hand, you use the word opportunity. you see that ceos are saying they are investing in hiring. there are remarkably more worried in europe and some of these other problems we're talking about. >> look at this. this is a more imminent. it tells me there is an
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opportunity. the primary barrier to getting a grand bargain has been an opposition to any revenues in the deal. the reason why there are not specific papers you can read and see what was the dl is precisely because thing started showing up and bob woodward's book. each side feels they did not want to write down i read you this and you offer me this. it was totally understood. people have been doing deals with the congress and the executive for 225 years. few other people have figured out how to do it. i would not pick the president
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diminishing his value. that does not possess the ronald reagan did. >> get them up to discuss the details. >> the deal of last summer did not take place in the press. there was a six week extension negotiations that they got 85% into the deal. >> you have to get 100 term. >> everyone understands that there was not a deal. if there is going to be a deal now, will it look like the one that almost was last summer. the framework of that deal was not crazy. it was basically $1 trillion on entitlements. this is approximately what it is. there was still an argument over should this just come from
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high income people? should the entitlement come from social security and medicare? that is basically what the deal would be. if there's going to be a grand bargain, at that is what it is going to look like. >> we're not going to get that here today. to stimulate a way economic growth? >> absolutely. it is a huge problem. we talked about differences from earlier. a big part of this is the tax rates are now higher than they were then. our corporate tax rate has gone much further out of line. many other countries have reduced our corporate tax rate. all of you out there are talking about the fiscal cliff. that is fine.
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if you are thinking about a major new investment program going into a new markets, expanding a new technology, you are worried about what the corporate tax rate will be. the best thing we would do is to get some that created an expectation that there would be a giant tax increases later. >> i agree with that. we have the high statutory rate. we have no higher than average effective rate. we have been there was a base of all corporate income and the world. >> one of the reasons we have that system is because people argue for many years that the more efficient thing, the better way to encourage investment was not to cut the corporate rate but to have a massively accelerated depreciation focused on investment incentives rather than cut the rate overall.
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i think the intuition and most is changing. the way we're going to cut the rate is not by closing loopholes. it is going to come through very big expansions of things which have a value. >> is that going to happen? >> it should. that is one part of tax reform. tom afraid they're going come back to corporations and say they cannot do it. >> it will be much better to integrate is for efficiency reasons and put nine an end to the nonsense that war but that pays a lower tax -- and put an end to the nonsense that warren buffett pays a lower tax
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rate. >> is going over the fiscal cliff just the equivalent of a grand bargain? >> i think that is what you said. >> it is different and that it is only one year. >> there is a lot of detail. if you look at where the alternative minimum taxes, they tend to be blue states. if you have a lot of children, it cannot be politically sustainable. it might be a step to achieve it. the defense cuts are also not going to be sustainable. >> de believe the fiscal cliff and the u.s. budget problem is the risk that the men and the women of this should be focusing on? was to be keeping them up?
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>> i was talking to secretary piper. i would ask him what is different that is going to make a deal. how will you use the fiscal cliff to set it up. if it is just that we have a mandate to raise revenues, i do not think that will be enough. he is close to the president on the issue. i think you could make this into an opportunity to address some of the things we talked about if you keep the pressure on with the types of things that is a simpson-bowles type of fallback. i would ask one last thing. the u.s. needs a complementary international growth initiative. we are stuck on trade. look at where this is all coming from. whether it is with the trans- atlantic are making the partnership real, there are some things you could do with middle and come countries.
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we need an international compliment. we cannot make this an isolationist fix. >> how about a jobs program? the people used to working on this. >> we have a jobs crisis. it is primarily because of the growth shortfall. at the most of the kinds of things we have been talking about, sensible consolidation would be sensible. some of this uncertainty would be removed. they would have some notion of what the taxes would be. i think there's a lot to be done among those lines. >> if you look at the entitlement program, what is happening in europe these days
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as people realize if you have unemployment insurance, go look at what the social disability is. >> of the entitlement reform is going to treat the rights incentive. >> i am now confused. 73% of us are worried about the fiscal clip which would cause a recession. not one of us are forecasting a recession. what do you make of that? >> do not to think we will go off the fiscal cliff. legs you all say we are. >> they're not so stupid that they will let this happen. >> they are. they could easily be that stupid. in business, a lot of this comes
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to the last minute. >> something you really have to understand but the country's interests are deeply divided between people who were collecting in people who are paying between burble in rural. there is not a sense of an overall strategy of where we want to go. this is something like we were before the crisis. there are big disagreements of that. there are big disagreements of how to get from here to there. this notion to deal with fiscal policy is intimately tied up with spreads between republicans and democrats to oversimplify their differences on taxes and spending in the nature of the program. there are three types of conservatives, a tax cutters
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spending limiters -- there are tax cutters, a spending limit terms. it is not sustainable. there is a good chance of what ever they do in the lame duck will be modest. >> can the united states economy go back to being an economy that grows preserve a year? >> if you look at this energy and the rising wages and china so you send some opportunities, if you look at the innovation, a huge potential. we have to get the fundamentals right.
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if you in the housing recession and have-instruction we would be there. >> this implies getting spending under control. if we do not, this implies bet tax increases will be for the broad working class. the working population is a minority partner. we are well over our time. >> everybody join me in thanking them. [applause] katherine mangu-war [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> also speaking, henry kissinger. he discusses such topics as the political transition in china.
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it runs nuclear program. the syrian conflict. russia. this is 45 minutes. i thought i would start here. there has been a lot of conversation in this room about the transition and this country. this is happening in china. tell us a little bit about what you think this transition will bring. well of bring substantial change to china? stability or instability? >> it will bring both.
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let me explain. and we tend to look at transitions in the united states. people come in. they have to lie to keep orders. they have insurance. they were made to execute. this is not how transitions are working. the power is much less than that from the president of the united states. he has to govern with the consensus of the standing committee.
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we can judge what the problem is. he is the chairman of the board. he is the most powerful person. he had to form coalitions within the system. the manner of execution brought the country is not necessarily through the first task. each generation of leaders have reflected a certain experience that the revolutionary. they recognize that it had to be, it needed to be reformed.
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they have the authority to give orders. he was brought in in the aftermath. he had to first establish his own authority. she was vastly underestimated by people. he turned out to be a very seminal figure in the debates of the communist party. who was brought in? i think they had concluded that china was here for a time.
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he was supposed to do things. he had more of a technological backgrounds. now we have to go to the leaders. some of them represents the victims of the cultural revolution. they live their extremely difficult conditions. they generally have come out of this experience with a sense that he had had strict
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instructions. i would have expected him to be more bizarre as it. they are divided. others have come up through the ranks. revealed iny be ther time. i with there would be those that they recognize, that they have a huge domestic problem. there are a number of components. there has to be more
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transparency. beyond that, it is not known what form this will take. the next transition 10 years from now will not be conducted quite the same as the current one. it is better that they have more candidates. the nature itself will become will be here as time goes on. in order to do what needs to be done, it is a certain broadening
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of the base. i think that will be the predominant concern. they will remove this from the countryside. it will put a great technical burden of interest on them. the move people into the cities. you cannot be sure what values they will adopt. they do not have the same premonitions. the dangers of their predecessors have, and the
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overwhelming portion will be domestic. they may be somewhat more assertive,. >> if it does appear that the increasingly appear culture of corruption is one of the problems. does he strike you as a leader who can control that backs who can be a reformer? it is trapped in the system that he now leads? >> he strikes me as a leader who understands the problem. in order to implement this, he
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will have to tackle and establish patterns. he is strong enough to attempt it. he is a man of considerable help. alth. that will be the challenge. i do not know whether they can do it. the stability of china will depend on it. >> what are these markers that we ought to be watching for on the road to tell us whether real
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change is taking place or the correction is being addressed? >> he is likely to be more in touch but the military because of the background of his family. his father was closer to the military. he was familiar with the military. he remained head of the military commission for two years afterward. it depends what one means by control of the military. the strategic doctrine that the
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military developed is more confrontational. i think he has a better chance breathing these into harmony. i would say he has a better chance to bring it. >> let me shift focus to another spot, to iran. we got through the election but that a military confrontation. we have a second term president to confront the issue. we have economic sanctions that seem to be working, but working to what end? what does your crystal ball say
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about what happens in iran and what the chances for conflict in iran are for the year 2013? >> when you look at the public statements that american presidents have said over 10 years, they have all asserted that the iranian nuclear program must be stopped. there are terms that show different shades of meaning. some say they must not have a new chilnuclear weapon. some say the nuclear capability , [inaudible]
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and it will become nearly impossible to manage. that means they can continue. there are three levels that identified the nuclear capability delivery systems. the systems are hiding the subject of the association. the question is whether the capability gets eliminated. it jumped from enrichment to
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weapons. our intelligence capabilities are so limited. the negotiations is to establish line behind it will not take place.
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there are too quick debates that will go on. then there is the question of whether they should negotiate. it indicated that it might take unilateral action. we said no option is up the table. it is proceeding at a pace that makes the debate potentially
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irrelevant. the question is whether we're willing to go to war on that issue. we need to go through this process. we have a limited time. the cannot stop the enrichment we will be living with the consequences. there is the increased
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likelihood of some nuclear weapons being used at some point. he said something that is unacceptable. those would be the criteria. i would not fight the battle over whether we should negotiate or not. i think we need to demonstrate an effort to find a diplomatic solution. we cannot afford an open ended negotiations appeared >> it is necessary to lay it? >> whichever option you favor.
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>> let me ask about going north and west to syria. syria was discussed. the march was discussed the less difference is seen between the two candidates. it came down to should we be arming the opposition. let me ask you that in a broader question. issue with the farming the opposition? be arming thee opposition? >> the american position on foreign affairs and is like the second world war when the united
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states had a position of dominance. it was found to be transitory. we have that degree of preeminence. it is still the most single viable country and the world. the key to stability in many regions and progress, but when you say you're no longer preeminent it means that you have to be able to establish priorities. when you establish priorities, we have to begin with an analysis of what the problem is.
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i have great respect for them. i do not think that is a correct analysis. i think that assad started out
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[indiscernible] someone is driven by a great quest of power. he has certainly committed many outrageous act that is fundamentally a conflict for the ethnic and religious groups.
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the likelihood is if anyone dominate syria, will they cover by methods comparable to those of the alawites? i talked to a christian leader a few weeks ago. what he is aspiring to is to have the autonomy for all the for all the various groups.
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what i ask myself is in the american national interest, it is certainly in our national interest that the support of the shia in lebanon by syria be interrupted. and that syria not become a protection of iranian policy. from that point of view, and assad victory would be against the american national interest.
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the look at the performance of the rebels until now, we have to be careful not to repeat in syria what we did not go afghanistan of army troops. i am opposed to using american ground forces or american military forces except for the objectives of the iranian position.
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>> let me ask my final question. on the broader plan they get started to touch on, we have seen a wide variety of american leadership roles in the last decade. i am curious how you will define the proper leadership role for the united states at the beginning at the 21st century tha? >> we started for wars with great enthusiasm and almost total support. it turned into a debate about
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the speed of withdraw with no other outcome. i was involved directly in the vietnam war. the most damning charge that could be made was to spread this victory. i start from the premise that we must develop a policy where if we engage ourselves we prevail. it is also an admission of our military strategy.
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the circumstances were overrunning but got his into a position where the enemy could control the pace of operation. matt be something that went to the british for the podium.
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we did it might be something that went to the bridges for the podium. -- that might be something that we went to the british for the podium. i think we need the extra concept of this. this is quite unacceptable. you have to begin with that. you can say this may have many moral elements. we need a strategy by which we can measure for what we are
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attempting. the new energy pattern on the front page is going to bring prut a change of strategic iorities for many countries in the world. the question of containing china may, it is a dishonorable objective.
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it does not need ot be done by the methods of the cold war. china and we can operate without [inaudible] this is a very calm during a way of putting appeared >> we keep coming back to china. question purity mention the cold war. there is a question asking -- there was a question about the cold war. there's a question about the role of russia going forward. >> that is the challenge of
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defining its identity. russia has been through imperial power. it does have domestic support by the efforts in asia and europe alternately, depending on where it was. now russia has the problem of the declining population. a declining russian population. the muslim population that is at the borders of the muslim world. it has a 3,000 mile frontier with china, which is a strategic nightmare. and a billion chinese on the
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order. to the borders the middle east which is a biological nightmare. it borders with europe which is allyarkly -- historic difficult for them. the image that russia has of leadership is that they have to be considered as a principal country in order to be taken seriously. environmentally, russia has to look for some patterns of cooperation. it has not yet found the methods of doing it. russia is not a strategic one to
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the best of her. they will bring pressure on the neighboring countries of the ukraine, especially the ukraine. it will move on to incorporate ukraine into its own system, i must say that if one recognizes an independent ukraine, it is important for the future of europe's, with many of the western countries coming towards ukraine. it is not necessarily compatible. the need to keep ukraine autonomous, it faces a huge
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economic problem. its budget becomes unmanageable. it has not yet managed to create an opportunity. so, i would think that the major problems would be to develop a proper base for the economy. other than the intimidating of its environment. i was a meeting this year with a group of people who describe themselves as reformers in russia.
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at these meetings i had said -- you want a democratic system? are you crazy? [laughter] >> another question about china -- is some level of corruption in chinese politicians inevitable? is there some level that is acceptable for the party? is the problem the [unintelligible] -- that he went above that threshold? >> i think it was primarily an attempt to achieve preeminent or eminent outside of the
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established patterns of progress being made within the party. because if he had succeeded, it would not change the whole structure of the party. there is no acceptable level of corruption. is some level of except -- corruption acceptable? it is not for an outsider to say. every indication is that there will be demonstrative evidence to curtail corruption. that is the big question. i think they will succeed, but it will be a rocky road. >> with the u.s. becoming
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increasingly self-reliant regarding oil and natural gas, how should our continuing role in the middle east be defined? does it change as a result? >> it used to be axiomatic that of people was in key countries of the middle east might involve us directly. this will have to be studied again, that from the point of view of energy suppliers, our interests in the middle east will diminish. over a period of 10 years to 15 years, countries like china and india in the middle east will
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increase. the role that they will attempt to play is bound to increase, because debt supplies still comes from it. given the importance of the islamic world and the wealth that will accumulate in that region, there will be a continued interest in its stability. but the new security team here, what they will have to do is make a non-traditional assessment on the evolution to take place. some of this will depend on the period of 10 years to 15 years.
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will it be normal policy? or will the killer -- or will there be influence over what it will be? i expect that india will become a more active player in the region. >> dr. kissinger, earlier we were talking about a new country on the american foreign policy agenda. president obama is going there. something is happening. does it matter, is it important, how does it matter? >> burma has a very large population of resources being
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run by a military government. it is between india, china, and itself. it plays an important strategic role. china has been playing a considerable as it has not dealt with me and mark. the evolution in the last year or two has made it more of a prophetic state. it is a positive strategic development. at the same time, however, we have to keep in mind the impact
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of the various regional groups in myanmar, from india and other countries, and also internally. it was born against over enthusiasm i am trying to cushion to rapidly. that is where we stop these from being preeminent and the 10th than as part of the belts in
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china. it sustains itself through economic and social reforms if you can say that you're doing well, that is a pretty good position to be in. i am in favor of the president going there. >> but do not get carried away? >> every three months. >> a good lesson for life, it seems to me. anyways, dr. kissinger, a 45 minute tour of the world with
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penny -- henry kissinger, i cannot think of anything else i would rather spend my time doing. i know that everyone in the audience is grateful. we appreciate your time very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> also at the event, ohio senator rob portman. he discusses tax policy and the future agenda of the republican party. this is about 35 minutes. >> very much. i appreciate your cooperation. before you go, this noon we are very pleased and fortunate to have senator rob portman of ohio. he is a first term senator from ohio. before that he served seven
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terms, i believe, in the house of representatives, before it was importuned by president bush -- >> nice way to put it. >> it led to what was arguably governor romney's finest moment in the campaign. the first debate, thank you so much for being here. our title today is the future of the republican party. this assumes, of course, that it has one. [laughter] let's talk about the election. obviously, you played a crucial role. i want to get your sense -- we
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are now seeing reports that the campaign was very surprised by the outcome, even right up to the evening of election day. because their polls were showing something different than everyone else. is that true? really, house surprise was the campaign? >> first, it was a very close election in ohio. a high was one of the key states. even had we won, it turns out the electoral vote count would have gone to president obama. recall, back in 2004, when john kerry lost to george bush, he would often say publicly and to me on the floor of the senate, but for half of the people that could fit in a horseshoe, i would be president today. it was a narrow victory. i do think that there are some
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reasons that are almost technical, which some of you understand well, some of you are very good at social media, and their turnout efforts were quite effective. if you look at the numbers after the fact, the turnout for the democrats amongst their base was better than we expected and i would say even better than they expected, based on their polling and sampling. so, they did a better job than we did. mitt romney got your votes than john mccain in ohio. the technology included the so- called orca system, which was the republican get-out-the-vote technology to ensure that we were targeting people and getting them to the polls. i am told that it got so many hits from people around the country with target calls, it
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thought it was under attack and closed down. for those of you hear from -- again, the technology field, with an interest in politics, we republicans want to talk to you. [laughter] we need some help. i think that the democratic system was quite effective at micra targeting. i have heard a lot of anecdotes -- you will love it, someone gets a call who is a democrat in law school and it says that we see you have voted and that this information is publicly available, 2:00 on election day, but your sister has not voted, could you call her. that is the level at which we were doing. frankly, we were flying blind at that point. part of it is technology, which led to a turnout effort that was very impressive on their side. in the end it made a difference.
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second, and we have talked about this, i do think that as republicans we were not able to take our message, the right message in a year where the economy was not doing well and people were looking for change, and take it to the level where people thought that it made a difference in their lives. folks in this room, nonpartisan, democrats, republican, i hope that you all agree that there are things we should do in this economy that our growth oriented. i think that we had a difficulty convincing people who were independent voters that this is not a turnout issue. dealing with independent voters, those in the metal, that they could make a difference in their lives.
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>> what was the failure? that had to be one of the core focuses of the campaign. was that a function of misguided strategy? or just a failure to articulate it in the overall campaign? >> i think it is both. the third element, of course, is that we were outspent. particularly early on, although there were not active it -- active resources to address every issue. those came back and hurt us in the end. may, june, july, august, we were outspent, 3-1. yes, even there it was more than two-one. you were seeing a lot of negative advertisements. they were quite effective. they were about the auto
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industry bailout and about policy proposals that were mischaracterizing them. but they were fairly effective. >> raising tax rates. >> we cannot forget that it was not a level playing field until the very end, even after the convention. they were still not on all the markets in ohio. so, that has a cumulative th affect. but the same thing was true in the other swing states, it is hard to come back from that. how do you take these policy issues and translate them into something that people care about, that is a huge challenge for us. i would suggest that many in this room share the same challenge. i think that sometimes you will find a monster own employees is hard to communicate.
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i will use trade as an example, but i would suggest that many view depend on global trade. one of my lunch partners talked about the revenue. for most of these companies the majority of our revenues were coming from overseas, yet many of the employees in the same businesses are fearful of trade and new markets, much less of dealing with the more complicated issues. that is an example where we all share this challenge, and how do you explain it to you -- to people that this matters? even during this fiscal cliff conversation, if we are talking about raising taxes on folks who make over a certain amount, you are obviously bringing in a lot how do you explain that to people? it may not affect many people in this room, but it does affect
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your business a lot. our economy in general is something that you care a lot about. how do you explain that to folks? a lot of discussion about the hispanic vote, the african- american vote. i agree with a lot of that, but it is part of this larger issue. when you get less than 8% of the african-american vote, you have given away the opportunity. >> that is one way to put it. >> because it -- look, lots of people who are african-american and hispanic share those beliefs i was just explaining in terms of economic growth -- there is a great opportunity for us to explain this in a way that is more accessible and inclusive, and i view that as an opportunity, but we were not
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successful in doing that in 2012. >> to pursue the minority question, it is not only the hispanic vote, the republican share has fallen for three cycles in a row. it is also the asian vote, but from 42% to 26% between now and 2004. what is your diagnosis of that? it is immigration actually a threshold issue that the party needs to change on? or is it the size of government question? where these folks are looking for government to play a more active role? >> if you look at the exit polling, i do not think it is a size of government issue. i really do not. i said that earlier in terms of the hispanic and african- american voters.
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they are looking for a constructive relationship with government. they are not anti-government, but they are not looking for government to sell their profits. this is still a center-right country. that is how people identify themselves. but i do think that there was a translation problem here, literally and figuratively. just in saying -- you know, this is an inclusive party. these policy proposals affect you and your family. it is not about wall street, it is about main street. nothing against wall street, but it is about the economy in general. again, i think there is a great opportunity here. immigration is a part of it. that is a policy issue that needs to be addressed. but that is just part of it. >> your convention was simply loaded with minority spokesman
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across every evening. >> and not many people watched it. to be honest. people say the natural disaster stuff played a big role in this election. shortening the convention in tampa and sandy at the end of probably had an impact. i do not know that it is easy to measure the impact. we have spoken amongst the voters who decided in the last seven days -- barack obama won a majority -- a huge surprise to political scientists around the country, who will tell you that the challenger picks up the majority of the last minute undecided voters with an incumbent because they are not happy with the status quo and in this case they broke for the incumbent. sandy probably had something to do with that. look, i think it is a matter of policy and outreach, with
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people, the right people speaking for the republican party. finally, it is a matter of town. -- tone. these policies are inclusive. a quick way to grow those for everyone is to have the policies that were laid out by mitt romney, and we just were not successful in that. >> do you think that the comments by the senatorial candidates mattered? did they carry in the polling that you saw on a national level? >> yes. again, hard to measure, but obviously the gender gap that we have on our side, which by the way persists, it is not something new this year, the final numbers are not in yet, but it will probably be comparable to 2008. it is a challenge to face as republicans.
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i think that those comments exacerbated the gender gap. >> which is extraordinary, when you think about it. in previous cycles a comment by a senator like that would have been echoed. >> what ever stupid things i say today can have an impact. assuming every gathering and fund-raiser, as we saw, everything is now subject to being repeated on the web. controversial comments spread like wildfire. frankly, in 2014, republicans have an opportunity on the senate side. there are 20 democrats up for reelection. we obviously have an opportunity, based on the numbers, to obtain a majority, pass budgets, and do the reconciliation. but we have got to have candidates who do not just have
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the right policy positions, but are aware of the fact that these kinds of comments can determine not just their election, but the national sea. >> are you going to run for the republican senatorial campaign committee chair? >> i am more focused on the policy side right now. i know that a lot of smart people in this room are closer than i am to how we react in washington. certainly, we will talk a lot about that during this conference. the focus has to be on a fiscal cliff and putting something competitive out there. i believe that we will not be able to get the economic recovery we hoped for. >> i wanted to get to the agenda, but also address one
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more issue with the campaign and republican coalition, which is young people. a lot of discussion in the press in the last week or so that you did not make as many inroads as you thought you would with voters under 29, despite the fact that many of them are living at home. the president's still won by 60% of that boat. is this partially a cultural issue? is gay marriage, for example, one of those threshold issues that makes the republican party look out of touch with those voters? do you have to change that, the way republicans talk about that issue? >> yes. [laughter] >> that is a very big concession. many of your colleagues would disagree and say that it was a close election, 2%, their turnout was better, it --
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turnout was better, we do not need to change a thing. >> every time an election is won or lost, people and it is the end of the party. it is a close election and the country is divided. if you look at the turnout issue, it is almost technical. so, it was a close election. the reality is that a party that was less than a% of the american vote -- of the african-american vote, less than 13% of the hispanic folk, that is a party that needs to adjust. i have talked about some of that today. some of the policy and the tone is about a message where we need to take our strengths, the position on the economy and opportunity, something they
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appreciate. you look at this unemployment rate, you would think that would be a big issue. for every young person getting out of college, those issues were not one that we were able to communicate in a way that was effective, clearly. some of these social issues are very important to that generation. paul and i graduated in almost the same year, from the same institution. it needs to be a acknowledged and dealt with. >> does the president had a mandate to change taxes? your opponent told us last week that he does not believe that that is his mandate. >> as you know, i am a fierce advocate for tax reform, for all
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the reasons we talked about earlier. america is falling behind in terms of our competitive position. one of the main reasons is our tax system is antiquated and there are ways to fix it. every other country among the developed world have transformed, reform, lower the rates. we have not touched it since ronald reagan. bill clinton raised at one point, but we have not done anything to touch the rates. the flow of capital investment and people is going to follow up of countries that have a more competitive environment. we have reformed the tax code and when we do that, you will get more revenue, it is guaranteed. we talked about earlier, there are opportunities here, for us
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as a country. for the joint tax analysis and what it could mean for macro- economic growth, ultimately it will lead to more growth. >> but if the president insists and says as he did last friday that this was fought over in the campaign and we fought over rising tax rates the white house tax secretary said the president would veto every bill that extends the current tax rate. if he insists that they go up, what would your recommendation be? >> having looked in two -- having worked in two white houses, first you want a president that can veto the -- the fiscal secretary, first of
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all. first of all, it was a bit behind the curve. it makes no sense whatsoever. add more layers on top of it. the able to create jobs. i am a huge data tax reform. you do do things in terms of deductions in the code. economists, right, left or center would agree that the current code is an efficient. it is a great opportunity for us. take this current, ossified code, put more taxes on top of it at a time when roughly 50% of that income is going to be paid
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by an entity deciding -- why add more people as the economy shows more life? and i going to take that risk? pay more to local sam? i am a small business owner myself. it makes no sense. the congressional budget office analysis of the past week about us losing 3 million jobs, i hope we look of the analysis, that the one provision alone says, you know, just like two years ago, the numbers were stronger than they are now, this makes no sense. why would we do that? >> because the white house economist does not agree that these matter the way the said. >> clearly, the matter.
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but if your goal is deficit reduction, which i love, i proposed a balanced budget. if you believe in that and what those tax rates would do to the economy as opposed to its impact on the deficit, it is hard to argue that this makes sense. i am not saying that we will not wind up with this discussion and this debate. i am hopeful we will look at this honestly with a lot of folks at the top rate, it does not close the gap much. in terms of the difference between the surpluses and the deficits that we wound up with over the last decade, like the bush tax cuts of 2001 that caused these deficits, 4000 --
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4%. even if you assume there was no economic growth associated with that. assuming the would take that point of view. let's set a date. six months, aggressive, ambitious -- we will have the current transformation -- the current system in place and in the meantime, let's make a down payment. spending cuts, and these for those six months, not the 10- year, it would be $110 billion. let's make the down payment now. let's have six months when the congress does its work and stays
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in session. let's come up with the tax reform that everyone agrees to in general. and the entitlement reforms that have to be done in this country. let's put congress on the spot. some would say that that is kicking the can down the road in a way that is too short. i think that congress can do it, if they put their mind to it. one problem with the super committee, which i sat on, which was not so super, it turned out -- >> you get all of the think was jobs. >> i was iron man on the super committee. each of us got a super committee attached to us. iron man of the kind of rusty in
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the process. the reality is that the president did not weigh in. he gave the democrats no cover and showed no leadership. he did not help us on tax and entitlement reform. without leadership, it will not happen, it never has. >> let's open it up. any questions? martin? >> you said that america is a center-right country? >> in terms of economics. >> but with this president's electorate? >> did you ask a question, liberal, moderate, or conservative, most are moderates or conservatives by far. >> it was about the mid-20's
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four liberals. >> know better than last time it was asked. people do not consider themselves to be liberal. they consider themselves to be moderates or conservatives. but when you ask people about the size and the scope of government, for all the hand- wringing by my colleagues on the republican side, that we have lost the country because so many want to be dependent on government, that is not true. yes, some people are having hard times and would like to have some help, but they want a hand -- but want some help, a hand up, not a hand out. yes, they believe that there should be a fair shake for hard work. but my state is tillich -- still a hard state. again, we were not successful this last go around in providing the margin that we needed.
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getting folks to understand that these policies were precisely that. not a radical departure. in fact, having america be true to its historic values and principles, which have made us uniquely capable of creating opportunity and wealth in the largest middle-class the world has ever known through private sector job growth relying on government not to trade jobs and the environment for success. i still believe that this is a center-right country, despite the results of this election. >> yes, sir? >> the comment that i would like to get to to come back on, i agree, i think we are a center- right country, i truly do.
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i do not think that the perception is out there that the republican party is a center- right party. the perception as much further right than that. the far right scares people more than the far left. i have four daughters more less around the age of 30 that were deeply disappointed in the last four years, but were really conflicted on how to vote because of that perception. i am wondering, as we talk about the future of this party, because we need a strong two- party system, what your comments might be of that. >> i would agree. your daughters are probably the demographic that both sides were looking to. who knows, maybe they got a call from joe biden on election day. [laughter] we love you, god love you.
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i think that you are right. that is the perception a lot of people have. how do you break through that perception? that is one of the challenges that we have. your adult daughters, social media is so important to them. it is literally how do you reach people where they live? for a lot of young people and a lot of seniors, for that matter, they are online. who we were, to that point, the other side was very effective in taking the comments that were made and have them around the country within hours, perhaps minutes. >> yes, sir? >> senator, my question about
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this is this -- it seems to me that the policies that you have identified as needing change might have been the policies adopted as the censor -- necessary to get through the primaries. how do you think the primary system can change to allow the candidate to come through and allow the center right as opposed to the far right? it seems to me that in the last election, people might have said that governor romney had -- was the most centrist, but he had to pass through that system? how can that be adjusted? >> on both sides there was a lot of talk about bad. until you go to a national primary, talking seriously about it, you will have this issue. i was with some last night who told me that there was an iowa republican, they said gosh,
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people will not even participate again, getting enough people involved, it is a broad spectrum of the republican party. state-by-state there's a more self selector system. we need to be careful the people are brought the representing the party. the president had no primary opponent, obviously. he was free to have a rose garden strategy of first. at the same time, we did not have that luxury. we had to go through that process. you will recall that herman cain was done to the candidate. rick perry was going to be our candidate. newt gingrich was time to be our candidate. i do not want to leave out michele bachmann, she was a candidate for a while as well.
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it was just so up and down. that is a part of the way that our democratic system works, going state-by-state to fight for it. every voter in new hampshire got a personal visit with mitt romney, michele bachmann, and herman cain, i think. it pushes you to do that. at the national level you would not have that challenge. they have to be in these town hall meetings and go through it. it does create some challenges. no question. >> the superpac probably spent $700 million, something like that. it looks like they achieved almost nothing in terms of electing candidates that the
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targeted. what does this say about anything? it is a stunning outcome. >> he wrote an editorial about this, rupert is too important to write his own anymore. but it was about the fact that there is a lot of discussion about what citizens united meant for this campaign. the top 10 groups involved, the spending was more on the other side. unions are allowed to take cues from members and use it to influence people outside membership.
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it is not that the other side was not spending a lot as well. if you add it all up. is that accurate? >> the unions may better vantage. channeling it into organizing and voter turnout, as opposed to the advertising. the other big issue was the advertising in may and july, which no one responded to. in my view that defined him in negative terms. >> as i said, the others would have been out there anyway. both the turnout in advertising dollars would have meant larger turnouts in those states, but in the and mitt romney lost. i will say that when you cannot
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coordinate between a campaign and someone else helping you, sometimes the advertisements are not as helpful. some of these were of message. in your business, think about it with your marketing efforts. if you had to have a marketing team in your business and an outside team that you could not communicate with, how would you feel about your results? probably not good. you would want to be able to target it and develop the message appropriately. i am not saying that it was not without a lot of impact. obviously if it was to be run through the campaign, it would be consistent with that message. >> or one bit of housekeeping, we are willing to have dessert
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and coffee downstairs. where we have been having the meetings right outside of the session. we will meet promptly again at 2:30. i want to thank senator four men in particular for coming. it has been great to have you here, taking time in what has not been the most fun question to answer one week after the election. thank you, senator. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> in his remarks, timothy geithner defended the president's insistence on vetoing any bill that extends bush era tax rates for those making over $250,000. this is half an hour. >> ladies and gentlemen, the
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treasury secretary of the united states, timothy geithner. [applause] >> i was running out of lines and am glad that you're here. the people in this room, we took a poll before you got here, they do not expect a deal before the fiscal cliff. there is no more information, all the other is a bit of highlighting in the dominican republic. so, i think that there is a lot of anxiety in this room. do you think that we will go over the cliff or are you confident that your side can get a deal with the other before we get there. >> there is a lot to see, but every reason to believe that this problem can be solved. it is true that we have a lot of
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challenges as a country. there is a lot of support for trying to do things that will help to make the economy stronger in the short term. much of this is risk for the fiscal cliff. there is a lot of support for finding bipartisan support and other things to make the economy stronger, like a set of commitments to finance a higher level of structure in education. i think there is a lot of support for doing the obvious things. the business exchange, things like that, those are important to do. it is important to make progress on the fiscal challenges, there is a benefit to the economy. this is a solvable problem and
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we want to do as much as we can to make some progress on each of those fronts. >> one thing on which there does not appear to be much agreement, should the bush tax cuts on the over 250,000 crowd be extended? i heard jay carney about one hour ago say that there is no way that the president with it -- will agree to anything that extends that tax cut. that sounds like a line in the sand. is it? >> it is important to start by acknowledging that republican leaders have explicitly embraced the recognition and support as part of the balanced fiscal reform package in the raise revenue. that is very important and encouraging.
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i think that that is good and useful. you know the president's position. once again, removing probably the greatest source of uncertainty and damage from the fiscal cliff. put out the reality that they now embrace. he is not to -- not prepared to extend them, let me tell you why that is the case. if you look at these carefully and thoughtfully, which is what we have done, if you look of the amount that must be put in over the next 10 years, if you recognize the realistic share that needs to be contributed, i do not see how you do this without higher rates.
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i just do not think that there is a feasible way to do it. >> it is not possible to raise money from zero " -- upper income people by limiting credits, stuff like that? >> what we proposed was a package that would raise another one when $5 trillion in revenue, about 1% of gdp. to do that with a mixture of modest rate increases, it was a very good time for the american business sector. to combine those with reforms limited by deductions for upper- income americans, there are other ways to do that. there is a lot of magical thinking about this. a lot of people who have looked at that question and have concluded incorrectly that there is a huge amount that can be raised, that is not true.
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people look at this, they look at it carefully, to do enough to restore fiscal sustainability, the long-term growth aspects of the country, making sure we do not add to the burden of middle- class americans, you will have to do so with rates and deductions. i think that that is the political consensus, that is how we will solve this. >> are you saying that if they do not agree to raise rates, we are going over a fiscal cliff? >> i do not see a realistic way to solve this without recognition. it is very encouraging that leadership has recognized that we will need to generate a
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modest revenues. we're just at the beginning. we will see how it goes. i agree that this is going to be tough. we know the lack of clarity and resolution will be a burden. but i think it is something that we have to go through. if we're going to find a better way to improve the long-term growth prospects of the country, we have to think about a way to resolve the current divide on these basic questions, and that is worth trying to do. >> as you and the president have said, we have to raise taxes and restrain spending. the president's proposals on medicare so far have been large a limited to the supply side. is the president going to lead with a proposal to do something different on medicare to get the
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republicans back off of their position on the top rates? >> the president has put in his budget, and not enough attention has been given to this, hundreds of billions of dollars in carefully designed reforms to the health-care system. we recognize that there are other ways to do this, but there are hundreds of billions of dollars in detail, specified reforms and i think that they will get a careful look now that we have the election behind us. in addition, he has proposed hundreds of billions of dollars in other savings. people can design those things differently. different ways to do it. he is prepared to look at those things, but we will start where we have been. >> if all the president says is that he has put out his budget,
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take it or leave it -- >> he is more careful with his language and that is not what i am saying either. what we have proposed is substantial in terms of the magnet to savings. there are larger in the 10-year window then the savings proposed impson-bowles. >> what happens if republicans cannot raise the top rates? >> why would you want to put the economy through that? particularly after conceding the recognition that the revenues would have to go up on the most fortunate americans. why would you decide to take the economy over the cliff and put
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it through the damage that that will cause because you are unwilling to agree to a modest increase on the rates for 2% of americans. it seems deeply implausible as a strategy and should be avoidable. >> why are you not willing to say -- in order to avoid the economy going over the cliff, we will entertain a different way to get the money out of the top 2% that is their radical deduction nepal >> when you take a cold, hard look at the resources that can be raised -- deduction? >> when you take a cold, hard look of the resources it can be raised that way, you will find yourself disappointed. remember, we're looking for 1% of gdp. not enormous, but still consequential. it will mean nothing unless you
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raise taxes meaningfully on middle-class americans. but even if you think it is could, -- to get a deal that will involve some tough things on all aspects of government on which you spend by saying that instead of a modest tax increase, we will have a much broader tax increase. is that simpler? remember, in any fiscal responsible restoring framework, you will be asking for sacrifices from the wealthiest of americans. everything on the spending side affects people much more broadly. the president is proposing an agreement that has a ratio of
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$2.50 and we got significantly into millions of lives. that is why we think this recognition, the shape of balance is going to have to involve rates and reforms. >> feels like i am watching the same play, the same actors. john boehner still in the house. the president is back at the white house -- back in the senate. why should i believe but again -- that will not try to talk to you about optimism, but let's look at what has changed. republican leadership acknowledging in publicyou havep acknowledging relief for the first time in this debate in
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public that they would agree to increase revenues as part of an agreement to help restore fiscal balance. that is a very important change. you could debate what has motivated that change, and of course it is true that that approach has very popular substantial support among the american people. you have a much greater recognition that the economy would benefit from a carefully designed balanced agreement on fiscal reform. putting that off indefinitely is not good for the country. that is important, too. i think, again, if you listen carefully to what people are saying and what many politicians are saying, there is a lot of consensus on the things that would be good for the economy now. extend the no class tax cuts. -- extend the middle class tax cuts. that is98% of americans with tax certainty. agreed to fund a carefully designed program of larger public investment and infrastructure. that is very good for growth. make sure we're doing sensible things in education, educating future americans. things with broad bipartisan support. they will provide the basic
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anchor for a agreement. >> if we go over the cliff, at some point when the congress to raise the debt ceiling. the president's leverage is until the end of the year -- if they fail to get a deal and that the taxes go up and the president will go on tv and say i tried, the republicans were obstinate, but the leverage shifts to them because you need the debt ceiling and the president has said that not raising it is impossible? >> i do not think so. anybody who looks at the experience of the costs to the country of those republicans employed last year will find that is not something it wants to repeat. -- do not want to repeat. you do not put the credit of the united states at risk, however. you cannot threatened to default on the credit, destroy the credit of the country as part of some game to get marginal advantage on policy
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questions. that has never been a responsible way to govern, judged by any predecessors, republican or democrat. my view is the people were part of that and are still there. they will do what congress only can do, pass the debt ceiling with less drama. it was not just drama -- it was enormously costly and damaging. >> what is your role in this next act? will you stick around until we get a deal? >> i will play a valuable, important role until around the inauguration. >> let me ask you a couple questions. then you'll get to questions from the audience. how would you evaluate the state of play in europe now? >> i think what the europeans have done over the last several
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months is very important. they are in a much better position to more carefully manage the incredible difficulty of the reforms they still have for their countries. it changes the way europe is governed and run on financial policies. even with the most compelling amount of political will and -- this will be very difficult. reforms will take some time. what they have done over the last several months is give them a framework that makes that possible. they still have a lot of tough decisions had. what i'm referring to is the combination of firewalls the government has agreed to and what the central bank is pushing. >> over the next few months, there is a question about whether spain will need a bailout and whether germany will approve. if they do not, all the ecb offers are useless. you told us you thought catastrophe diminish to the part where they were manageable.
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they seem to be rising again. >> this will be true for years. you will see a lot of uncertainty about the concourse of each of these additional steps. in greece over time and any other country that gets itself in a position where it is difficult to borrow sustainable rates. by credibly committing leaders of europe to take out the risk of catastrophic failure from the equation from the markets, they bought themselves some space to do that without there being much damage on the rest of the world. they have to demonstrate they are willing to do those things. they are attending a much better position to do. even with the events of the last few weeks. i cannot think it is surprising that greece is still hard. the greek government has done enormously difficult things over these last few weeks and i think those reforms will be
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rewarded by more support from the europeans. you will see a little uncertainty about other aspects. >> what does europe need to do in the next two or three months? texting have to demonstrate -- >> they have to demonstrate they are moving to put reforms in place. and a better mix of constraints. those are the key things they have to make progress on. that will take it difficult amount of political negotiations over the next several years. >> china. with the new leadership -- what will you be watching for? >> the big question is what will be the shape of this next-
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generation of economic reforms in china. they have had a remarkable record over the last 30 years of broadening the scope for property rights and private enterprise, managing a remarkable increase in incomes brought this but growth across an economy. but they have a difficult set of challenges ahead as the population -- as the population ages. they have run out of room to use those tax forms of stimulus to get the economy moving in the short term. you will look carefully to what they do to expand the scope for private investment, private initiative, better property rates not just for us but chinese innovators to expand opportunities. people are going to look to the chinese government to see what is the new direction going for it. all indications we have are that the people that will be at
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the center of the government going forward are committed to that path. not debating that basic trajectory. but there will have to make some decisions about the shape of those reforms. even as recently as last spring, despite the fact they were in the midst of a political transition, they were setting new frontiers of financial reforms. they have some more work to do on that side but that is part of the commitment towards a more market oriented economy. >> what about their attitude toward their relationship with us? it is clear what kind of relationship they want with us? >> i think they recognize how important it is for them to have a stable expanding global economy and how important it is
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to them to still enjoy access to the major markets. it is because of the recognition that they have been willing to move on a range of things that are very hard for us an important to our commercial interests. i think that is the balance will hold going forward. the democrats keep citing clinton era rates. where the only relevant for income-tax rates but not for spending levels or as a rate of gdp? i will sign up for clinton era income-tax rates it obama commits to clinton era spending levels. >> you cannot repeal of the aging of the population. million americans become eligible for medicare and social security in the coming years. it is not something you can ignore. part of governing is recognizing those basic realities. the level of spending projected
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in the president's budget is one example. the modest spending outside of its adamant rhetoric -- relative to the share of gdp. in the president's budget, the level of spending for non- defense discretionary spending, those levels are very low. the share of the economy relative to clinton. we think we have laid out a sensible balance in this context which shows significant restraint where you need to show it. but still recognizes that we cannot ignore the fact that we have millions of americans retiring. >> why should we believe an administration that has ballooned the deficit attacked
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it with any vigor? >> the people who say that miss some basic realities of what drives our deficit. it is to the deficits have gone up. it has gone up for reasons you all know. let's just review them -- they go up significantly because of the cost of the bush tax cuts and expansions we inherited. go up significantly because of the cost of the crisis and recession. the policies be put in place which have helped bring economic growth back are only 10% added to the increase in deficit over this amount of time. people are mistaken in their basic app tradition. >> i hear about a continued concern that this administration is simply somewhere between does not get
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business and is tossed out to it. -- hostile to it. people complain about regulation people complain about regulation. you have heard the laundry list. what do you see to american ceos when they complain to you about that? >> i say tell me what policy you are concerned about and let's talk about the merits of them. if there is a proposal in the financial system you think is too costly are missed designed, some of what that is. what would you replace it with and how would you do it? if you look on balance at what is set up policies be pursued and what the fed pursued over the last three and a half years have been, they have been dramatically effective in not just putting out the financial
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buyers got laying out the foundation for economic growth. the rate of growth in the assessment and productivity over this time has been a very good set of policies for the american private sector relative to -- if you look at in the country's experience in financial crises, i think we at basic test. -- we meet that basic test. if you are concerned about the shape of reform on the regulatory side, it is true financial reforms are tougher. you want to leave this economy vulnerable to a crisis like we had in 2008? the things we haven't done have been good to the long-term health of the american financial system. >> anyone else have a question they want to pose? yes?
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>> how much more debt are you willing for the american people to bear to continue to stimulate the economy? >> our deficits are not about -- now the above 5% of gdp. they are down dramatically from where the heat -- are now down about 7.5% of gdp. there are down dramatically from where it started. you need to get the deficit down to the point where the debt stops rising as a share of the economy. to do that, you have to be slightly below 3% of gdp. that basic objective and there's everything we propose on the budget and at the same basic objective that anchors the proposals before us today. it is a basic recognition. how much is enough? that means you have to go down to below 3%. to go from 7.5% to 3% --
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spending stuff is automatic in a recession starts to recede but you still have to find consensus on a set of reforms. that is what this debate about the fiscal framework is going to be about. how to come to consensus on roughly 2% of gdp in additional savings. roughly 1% on the revenue side and the balance on the spending side. you do not want to do that quickly. if you try to do that too quickly, you will really hurt and economy that is still not growing as rapidly as he would like. given the pressures around the world in europe and elsewhere, you want to keep your focus on
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doing things to help make it stronger in the short term. that means you have to have a gradual path. >> this will be the last question. make it a good one. >> it seems one of the themes which inhabited the first four years was the balance between economic priorities and other priorities. how much political capital energy was spent on health care and other things. the question is, how do you strike that balance and you see that balance changing at the go forward into the next four years? >> let me complicate your question by saying about the balance between short-term and the immediate and long-term things that matter for the strength of the economy. it is important to recognize
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that as we get to this next stage of this fiscal reform debate, you have to think about this not just about how you bring this deficit down gradually to the point where there sustainable. you have to think about this and the terms of what can you do to improve the long-term growth perspective of the american economy. there are a set of things we have to do in and for structure and education just to name two. that are very important to the growth potential of this country and not very expensive. if we sacrifice those objectives in the interest of getting more fiscal restraint more quickly, we will do a lot of damage. i would encourage people to look at -- we want to look at things that are good for growth now and growth over the long run. that is why you do things that mattered to the near-term strength of the economy as a whole.
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but the president said our principal objective of the economic side will have to be what is good for the growth prospect of the american economy and how to design a balanced set of reforms to restore fiscal stability. i know there are people out there who say it's november 13. the end of the year approaches. why don't you just put off all the stuff to buy yourself some time? why not extend everything got to mark i would discourage you from doing that as an -- as an attractive alternative to review leave all the uncertainty -- alternative. you leave all the uncertainty. what incentive have you given anybody to negotiate? if you say again we are going to extend and i -- and delay, what gives people the confidence?
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they always believe if they hold out, they can just extend again. i know that cliff is unattractive. it would cost a lot of damage to the american economy. that damage is avoidable. but be careful about those who argue for and urge for last -- let's just extent. it will leave a different source of uncertainty which is what will give the people the incentive to come back and do something tough? thank you. [applause] >> on tuesday, kent contrad said a final plan would likely cost $5 trillion. he said changing the payment formula could be part of the final deal, along with raising
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tax rates on the wealthy. he spoke at the annual ceo council conference in washington. this is 25 minutes. >> one of the most constructive conversations that has taken place has been a group of senators called the gain of six. we invited all, but the senate is busy. we got one. we will ask him to carry the burden of all six today. senator conrad will be interviewed by john vessey. they are negotiating in the back room. senator conrad was -- has been budget committee chairman. he is retiring at the end of this year. it is great to have you here.
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>> senator conrad, thank you very much. to the questions, the first question david asked to set the context and you a sense of the mood of the business community. do you believe there will be a constructive deal in congress before the end of the year? only 1/3 believe yes. 2/3 think we may go over the cliff unless there is an extension. let's go to the second question. if there is a deal, how are your investment plans likely to be affected? increase? decrease? stay the same. if we could get a quick vote on this.
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as everyone had a chance to vote? increase, decrease, stay the same. we will wait just a minute longer. senator conrad -- while we are waiting, senator conrad was not only a member of the gang of six but a member of the gang of eight, every gang tried to contend with -- we should look at your tats. probably have every effort to put some sort of remark from the deficit deal. because he is retiring, we are expecting that to be -- he will tell us the secret of what is happening in the senate's right now. do we have results? 77 percent said it will increase investment jerry 22% say the same. 0 say it would decrease.
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a tremendous pent-up demand for some sort of resolution. let's go to the third question. are you optimistic or not optimistic about your business prospects over the next year? 1 is optimistic, 2 is not optimistic. senator, all we talked on the phone. you are optimistic there will be a resolution of this. i wonder if you could give us your sense of what would that look like? what constituent parts, what sort of revenue increases and what form? i'm speaking for myself. not as part of any of the group's i have been part of, whether it is bulls simpson or group of six or group of eight. at the end of the day here, we will be in the range of a $5
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trillion pacas. ended package -- $5 trillion package. i hope we are. i think we are going to have -- we will look back on what has already been done and factor that in. what has been done so far has been on the discretionary spending side of the equation which is less than 20% of the overall budget. so it is critically important we move to entitlements, reforming entitlements, and the revenue side of the equation. there will be additional domestic discretionary savings. there will be additional entitlements other than the main entitlements, that is social security and medicare. social security i think will be handled separately. if one of the part of the deficit reduction bill. any savings will be part of extending the solvency of social security itself. >> that is done howard? by reaching the age limit? >> it will be done in several
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different ways. extend the cap in terms of what income is exposed for funding social security. the age will be extended over an extended period of time. you also change the so-called bin points, a technical way of determining what social security payouts are. he will also be an inflation adjustment. the of this adjustment is done in a way that most economists say is not fully accurate-- the inflation adjustment is done in a way that most economists say is not fully accurate. >> the people in this room, they qualify for social security? >> sure. >> so there should not be a means test? >> that goes to the question of ben points. that goes to the question of
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what revenue is used to support the system. people who pay should be eligible to get something out. my former father in law is a very successful man. he told me many times i do not want social security. i do not want to take it. if you do not want to, you don't have to. >> there are a lot of taxes paid -- i think it would be hard to have a program where people are not eligible to receive what they paid for. >> there are a lot of tax paid programs people who do not get anything thought of. why should social for -- why shouldn't social security be any differently? >> it is designed as a social insurance program. if you pay premiums for social insurance, you ought to qualify for the benefit. i think much easier to justify means testing is medicare. i've voted as a member of the
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finance committee in number of years ago. a group of us passed in the finance committee means testing of medicare. >> i did not understand the justification there for working class families to pay a part of the medicare benefits for very well-to-do individuals. that is a very different model than the model for social security. >> at the end of the day, once -- all this is done on the medicare fund, what is the resolution likely to look like? >> the most likely resolution is something that is done to slow the growth to the growth that occurs in the underlying economy. if we can accomplish that by a series of measures, i think we would have done ourselves and the country world of good.
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slow the growth of spending to the growth of the economy. >> how do you do that? >> there are a series of steps that can be taken. more co-pays. going back to providers and asking them to take less of an increase. raising the age of eligibility which is more attractive now that we will have exchanges in place. meaning people who are not in medicare will have an alternative place to get coverage. >> are these elements likely to be part of a final deal? what happens to the defense budget >> i think it will be asked to take additional savings.
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it would not be asked to take the amount in the sequester. defenses are taken savings approaching $500 billion over 10 years. that is in the budget control act. the sequester would ask defense to take another roughly $535 billion of savings. it is done in a way that makes almost no sense. there is the prioritizing. -- no prioritizing. i do not think any serious person has looked the approach and said that makes any sense at all. my own anticipation is that number will be reduced but there will still be a request for additional defense savings probably in the range of $200 billion. >> and that gets achieved? cuts at that level? >> well, if there is going to
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be an overhaul deal here, a deal that has anti the reform, revenue, additional discretionary savings, it is all going to have to move as package. that is my best judgment at the moment. >> talk to us about process. the fiscal cliff is a few weeks away. are there extensions? how does the process work now? what do we get come december 31 and when do we begin to approach a resolution of the sort you just described? >> here is what i have been trying to sell. number one, a down payment.
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in the range of $400 billion. on the revenue side and on the spending side. those are things that would be done now that one could be a short are actually going to -- be assured to actually happen. because they would be passed now. a framework that sets out how much money they are to save and raise and what the balance is between the two. those committees of jurisdiction began -- then be given six months to work out the details, to provide specifics. third, if they fail for whatever reason, there be a fail-safe. that fail-safe actually goes into effect if congress if we does not produce the savings and revenue agreed to in the framework. >> sounds like a sequester. >> different than the sequestered. the sequester was designed to say this is not something
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anybody would want to do. this approach would stand back on its head. instead of having something that was widely seen as making no sense in being unacceptable, they have it fail-safe that you could live with. my well live with if committees -- might well live with it committees in jurisdiction to not reach that which is called for. it would have to be part of the package. said the that is offered, -- something offered, hopefully by leadership, by the white house. and what have all these elements. >> we are counting on the market to beat everybody into line. if this is not done in a responsible, rational way, markets will step in.
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secretary geithner just talked about putting the dollar at risk. put in the credit rating of the u.s. at risk. is there really a compelling argument within congress? when there is a crisis abroad, it is the first place people move into. the reserve currency around the world. is that hovering over these negotiations or that anxiousness about the markets? >> i think it is hovering over this. there is a more immediate prod, the reality that will confront every member of congress. these tax cuts from the bush era are all going to expire. the sequester, $1.20 trillion across-the-board cuts. that is in law.
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alternative minimum tax will go to affecting 30 million people. the doctors who treat medicare patients are going to face a 28% cut. these are not somebody's imaginings. these things are all in law. they are going to happen. there is a debt limit the session -- that will have to be -- it is a debt limit extension that will have to be addressed. >> that could extend these things. >> they can. i think the market's reaction there is very important. the notion that markets would not react well to kicking the can down the road. i think it is more the market. the american public would not react well to just kicking the can down the road. >> bob zellick and austen goolsbee bought up the notion
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that this feels like groundhog's day. what is different post-election than pre-election? same players, slightly different complexion of players come inauguration day but not really. what has changed that gives the optimism that some deal will be struck now i could not have been struck before the election? >> first of all, the president was reelected. had he not been reelected, at the other side had taken power, he would have to wait for the new president. because you have the sitting president reelected, he did not have to wait. number two, we are days closer to all these things actually happening. the end of the tax cuts, the alternative minimum tax, the sequester, the automatic spending cuts. all those things are very close
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to being upon us. that does not deal with unemployment insurance and the payroll tax holiday. because those things are also set to end. so there is a growing momentum that i think will compel colleagues to act. could i be wrong? absolutely, i could. because there is rigidity in the system. especially on the far right and the far left. let's be candid. there is rigidities there. it is conceivable that you get into a negotiation and people just cannot adjust to this new reality quickly enough to make it time the decision. -- make a timely decision.
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so you do go over the cliff. i hope that does not occur. but it is possible that you have to get into going over the cliff before people opposite to act. -- before people are persuaded to act. >> epicenter last i described -- a senator last night described the president as introverted. not particularly outgoing in bringing people into the tent. it is a critical need for the president to step in and bring people together. is there a deficit of schmooze velocity coming out of the oval office right now? >> i would say he is sufficiently extroverted to have just won a national elections. this one by more than 3%.
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three presidents --i think we have for presidents who have been reelected for a second term by these kinds of margins. reagan being one to read obama being one. so this notion he is introverted and not affected -- really? -- not effective -- really? i would say he has been pretty effective. looking back, i do not know of people read ezra klein's column today about all the things that have happened. the money for the financial institutions being passed. really dramatic health care changes being made. these are real things that have happened. you may not agree with them but those are real accomplishments. one war ended, a nother one being put to a close.
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if you think about what he inherited, it was a remarkable set of circumstances. i'm not sure he had much time to choose members of -- as previous presidents have your years to it -- he was dealing with one crisis after another. i can just say for me, i have been at the white house more under this president and all the other presidents i have served with combined. he is a serious guy. i expect that you will see now that a lot of these other things are not in crisis mode that there will be more engagement with individuals on capitol hill. i think that would be a good thing. >> the you need at the moment like this an lbj type a personality? should we be able to rely on the vaster institutions we have
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here? should it require an activist president? trent lott said people split and fly home. they did not get to know each other. they are not out having dinner, smoking cigars. finding commonality so they won't be nasty on the floor. that is tougher now. shouldn't those institutions be able to solve those managerial problems? >> they should but it does make a difference. i just finished carrow's book on lbj. here is the president calling the government printing office
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to make sure they do not close so that congress can get a bill printed because he knew he needed to act because if he waited until the next day, some of the votes he had might drift away. can you imagine? a president, and the ever- present i served with, calling the government printing office to keep them open? i do think a dash of that would be very helpful in what we are involved with now. on this complex issues, just as important. -- trust is important. if he spent hours and hours together -- if you spend hours and hours together, a certain decorum develops. it is important in getting an agreement. >> thank you. it will go to some questions from the audience.
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yes? >> do you think it is necessary for the senate to pass the budget and if so, when and you think they will do that? >> there are different ways of passing a budget. there is a budget resolution. we have heard a lot of criticism, a budget resolution was not passed. instead of a budget resolution, a budget law was passed call the budget control act. the budget resolution never goes to the president for his signature. i think a lot of people in the country do not realize. it is purely a congressional document. in this circumstance, a budget resolution is not what we need. i think we need a budget law. a budget control act was a good beginning. set spending caps for ten years. it set ten years of caps and
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gave special powers to is special committee to deal with entitlements and revenue and said if you reach agreement, you will not face a filibuster. you will be able to offer that on the floor and get an up or down vote. that was a huge deal. they failed so the answer was the sequester. in this circumstance, i think we would be better to have a law rather than a budget resolution. >> another question? >> one last question. you are from north dakota. the bachmann oilfield is not -- now changing the landscape of u.s. energy. that will change manufacturing
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costs during how long before that begins to pass through into the national budget as a revenue producer in a variety of different ways? >> if you permit me to go beyond that -- it is incredibly exciting. it is helped dramatically reduce our dependence on foreign oil. we have gone about 60% dependents down to 42%. in a report out yesterday said by 2013, the united states will be energy independent. that is a huge deal overtime -- a report said that by 2030, the united states will be energy independent. that is a huge deal over time. that will strengthen the economy. at changes our circumstance. we will keep money at home. that will help create more jobs. that will improve our competitive position. that is going to have a budget in fact the most budgets are looking at a five-year window. very rare that we go beyond five years three the vast majority of time, it is a five-
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year window pretty do not get that much help in the first five. it has enormous implications when you go to the second years and third ten years. we have some very good news that will give a lift to the american economy and improve our position. it is a terrific thing. we are lucky to have it. >> on optimism, the results of that third question. that audience was pretty much split down the middle. i will ask robert thompson to come on for closing remarks. >> thank you very much. one of the few optimistic nights. i would like to thank our sponsors, without whom we would have been over it this booklet -- without whom we would have
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been over a fiscal cliff with this conference. i like to thank dorothy and her team for organizing the conference. i would like to thank ellen murray. she loves washington and conferences so much that he decided to stay in washington and london organization that is -- and run an organization that is one continuous conference. in a week's time, he leaves the "wall street journal." mr. allen murray. [applause] and now outside, and other -- beer, beverages and banter.
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thank you very much. >> tim pawlenty offers business community response to the so- called fiscal cliff and u.s. economy today at 6:00 eastern on c-span. >> truman had two proposals puzzles in his life. he got into politics having failed at many businesses as a young man. the only way to get into politics in the zero was to be part of a machine. there were two. he hooked up with the pend ergrast machine. the most corrupt.
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hwo could he possibly work in this machine in local politics? that was the first thing i have to work out. the second is what we all know about. that is how he came to use the atomic bomb. what was behind the decision? what is the story about the atomic bomb, before he became president and when the decision was on his desk? it is still a controversial story. i wanted to know more about it. >> she looks at the life of harry truman tonight at 8:00. >> on tuesday, the tsa administrator spoke about what travelers can expect in the upcoming holiday season. it is anticipated over 24
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million passengers will travel the skidding weaken. the agency plans to replace full body x-ray scanners at seven airports to ease crowding. this is about seven minutes. >> good morning. thank you for being here at washington national airport. the holiday is fast approaching, thanksgiving next week. we are anticipating a busy travel season again. the men and women of tsa are ready to provide the most effective security in the most efficient way. we are anticipating over 24 million passengers traveling during the thanksgiving holiday. that can create challenges and opportunities for the public, especially those that travel infrequently. part of the reason for being here today is to encourage those infrequent travelers to visit the tsa web site to look
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for ways to understand the screening process to help others in line deal with the longer lines we usually see. this has been a busy and productive year for tsa as we have focused on developing, testing, and implementing a number of initiatives enabling us to provide the most effective security in the most efficient way. risk based security in the passenger screening context allows our officers to focus attention on travelers we believe are more likely to pose a potential risk while providing an expedited screen and perhaps a better travel experience to those who pose less risk. in the last 12 months, more
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than 38 million passengers have had an opportunity to experience some type of expedited screening. this includes virtually all passengers 75 and older, 12 and under, airline flight crews, military members, and those who participate in what we call the tsa precheck. it is one of the most visible initiatives enabling tsa to move away from the one size fits all model we stood up after 9/11. tsa has screened more than 4 million passengers through those lanes across the country. it is currently available in 29 airports, including here, in operation with five u.s. airlines. we anticipate it will be in 35 airports by the end of the year with bwi, san francisco, and
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orlando airport coming on-line this week. additional airlines will be coming on board next year also. as we look toward 2013 and beyond, we are encouraged by the feedback we have been getting from travelers, businesses, airports, airlines, associations, and congress. we have look forward to expanding the known and trusted populations in 2013, always mindful of the latest in terrorist intent to do us harm. it demonstrates our commitment first and foremost to security with the understanding that the vast majority of passengers do not pose a threat to aviation. also this year we lost tsa cares, a help line number
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designed to help with medical conditions prior to getting to the airport. 855-787-2227. travelers may call the toll-free number with questions about policies and procedures as well as what to expect that the security checkpoint. when a passenger with a disability calls, and rep. will provide information about screen and relevant to that specific disability or condition. in some conditions, they may be referred to an expert at the airport. tsa employees are travelers. we understand holiday travel can be stressful and a great trip often begins with a positive experience at the airport. tsa will be fully staffed to prepare for the high volume this season. with security at the forefront, we are committed to processing
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passengers as safely and efficiently as possible. thank you for joining us. i would be glad to take any questions. officers are here to provide travel tips after question and answer. thank you. >> can you talk to us about the plans? what would you say to passengers booking flights to return after the first of the year? what could this look like for them? >> we have made a number of plans in the event sequestration does go into effect. the bottom line is for the department of homeland security and tsa, it is to make sure front-line operations are not affected. other areas would be reduced. we would need to meet the numbers in sequestration. the bottom line is to keep the
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front line security operations in full force to keep the movement of people and goods moving smoothly. yes. >> there has been some question about the ability of people to change bar codes. what are you doing about that? >> we have been working with the airlines. some have a digital signature on the boarding pass. we are trying to establish a baseline standard across all airlines. there are some things to keep in mind. someone on the no-fly list cannot print out a boarding pass at all. that is precluded in the system. some people cannot print that out. if they are allowed to travel with additional screening, that person cannot. the boarding pass at home. it has to be done at the airport ticket counter. some of the vulnerabilities
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discussed in the media have missed those key point. we're working with the airlines to establish an encrypted bar code that would address all those issues. we're working with a technology company to make sure we can have real turn checkpoints to insure the boarding pass for the document checker and a person at the gate. a number of things are going on as we work to address the issue. >> there are reports tsa is moving to other devices in large airports. is that going on during the holiday season? >> we have already moved from seven large airports the advanced imaging technology machines to accomplish a couple of things.
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gives us a greater through put. people can go through more quickly because we do not have separate personnel in of the room that have to view the image and radio back to the checkpoint security officer. the passenger can see the generic outlined at the checkpoint when they come through. they simply turned and looked at that. green says it is ok. there could be areas on the body highlighted indicating that area of the body. when i go through for some reason, they asked me to lift my tie and do a patdown for that area. the idea is to create better efficiency. we're working with the manufacturer. they have not completed the privacy fifth caller -- the
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privacy filter yet. we want to make sure we can get as many people through as possible. >> humans and the manufacturer is trying to develop software -- you mentioned that the manufacturer is trying to develop software for privacy concerns. moving them from the airport, those that mean you have given up on the machines? >> they still perform a vital function to check devices. we went with two different types of equipment and technology to drive competition and get to the next level of detection with the best security. we're still committed to that. the manufacturer has to deliver based on our specifications required. we are still in the process. we're waiting to see what happens as they meet the requirements we have set for the privacy filter.
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thank you very much. safe travels, everyone. >> truman had two big puzzles. he got into politics having failed in many businesses as a young man. the only way to get into politics in missouri was to be part of a machine. there were two. he took up with the pendergast machine, the most corrupt and vicious machine. i said to myself, how did this happen? how could he possibly work in this machine in local politics? that was the first thing i had to work out. the second is what we all know about. that is, how did he come to use the atomic bomb? what was behind the decision? what is the story about the
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atomic bomb before he became president and when the decision was on his desk? it is still controversial story. i wanted to know more about it. >> from his early life through his presidency, a look at the life of harry truman tonight at 8:00. >> tomorrow, the former u.s. controller general david walker will discuss his idea to avert the so-called fiscal cliff. and look at u.s. oil output and efforts to make the country energy independent. the former fbi assistant director talks about the fbi role in investigating cyber- related crimes.